Court File and Parties
Court File No.: CV-21-00661737-0000 Date: 2024-08-21 Superior Court of Justice - Ontario
Re: BARBARA WILDS, Plaintiff And: 1959612 ONTARIO INC. o/a GIBSON BUILDING SUPPLIES, Defendant
Before: VERMETTE J.
Counsel: Alexis Radojcic and Patrycia Geca, for the Plaintiff Jonathan L. Frustaglio, for the Defendant
Heard: In writing
Endorsement as to Costs
[1] On June 14, 2024, I released an endorsement (2024 ONSC 3452) granting in part the Plaintiff’s action and motion for summary judgment. The Plaintiff was awarded damages for wrongful dismissal in the total amount of $9,923.85 and punitive damages in the amount of $10,000.00.
[2] The parties were not able to agree on costs and have delivered costs submissions.
The Plaintiff’s Offer to Settle Dated December 21, 2021
[3] The Plaintiff served a Rule 49 offer to settle on December 21, 2021 for total damages of $17,889.23 plus costs. Given that the specific terms of the offer to settle are important, they are reproduced below, in part:
The Defendant shall pay to the Plaintiff $17,889.23 as follows: (a) $12,889.23 in respect of the Plaintiffs [sic] claims in subparagraphs 1(b), 1(c) and 1(d) of the Statement of Claim, less statutory deductions for a retiring allowance pursuant to the Income Tax Act; (b) $5,000 in respect of the Plaintiff’s claims in subparagraph 1(e) of the Statement of Claim, without deduction; and (c) pre-judgment interest pursuant to the Courts of Justice Act from the date the Statement of Claim was issued through to the date on which this offer is accepted.
The Defendant shall pay to the Plaintiff an amount for her legal costs as follows: (a) If this Offer to Settle is accepted by 11:59 p.m. on January 7, 2022, the Defendant shall pay the Plaintiff’s costs of $7,000 (inclusive of HST and disbursements); or (b) If this Offer to Settle is accepted after 11:59 p.m. on January 7, 2022, the Defendant shall pay the Plaintiff’s costs and disbursements on a partial indemnity basis, as agreed upon or assessed, up to the date on which this Offer to Settle is accepted.
[4] As set out above, paragraph 1 of the Plaintiff’s offer to settle refers to her claims in paragraph 1 of her Statement of Claim. In subparagraph 1(b) of the Statement of Claim, the Plaintiff claimed damages for wrongful dismissal, representing lost earnings, value of lost bonus entitlements, and employment-related benefits over the reasonable notice period. In subparagraph 1(c), she claimed damages for unpaid wages. In subparagraph 1(d), she claimed damages for accrued but unpaid vacation pay. In subparagraph 1(e), she claimed damages for aggravated, mental distress, moral and/or punitive damages.
Positions of the Parties
Position of the Plaintiff
[5] The Plaintiff seeks costs on a substantial indemnity basis in the amount of $37,895.22 or, alternatively, elevated costs over and above her partial indemnity costs of $31,751.18.
[6] The Plaintiff submits that she was the widely successful party in an unnecessarily hard-fought motion. She argues that the three main purposes of costs – to indemnify the successful litigant, to encourage settlement and to discourage/sanction inappropriate litigation behaviours – favour a costs award on a substantial indemnity basis.
[7] The Plaintiff states that the costs that she seeks are consistent with wrongful dismissal actions decided by summary judgment motions where the Court awarded punitive damages and the plaintiff beat their Rule 49 offer.
[8] In relation to her offer to settle dated December 21, 2021, the Plaintiff points out that the damages awarded by the Court totaled $19,923.85, and that the damages awarded exceeded the offer by $2,034.62. Accordingly, the Plaintiff submits that she is entitled to costs on a partial indemnity scale to the date of the offer and substantial indemnity costs thereafter. The Plaintiff states that a defendant’s conduct may properly be the origin of both an award for punitive damages and an award for substantial indemnity costs. In the alternative, the Plaintiff argues that her settlement offers should weigh heavily in the exercise of the Court’s discretion to award costs under Rule 49.13.
[9] The Plaintiff states that she made every effort to resolve this action on a reasonable and cost-efficient basis, therefore entitling her to elevated costs. She submits that the Defendant did not make a genuine effort to settle the action on reasonable terms.
[10] The Plaintiff argues that the Defendant’s unreasonable conduct drove up her costs. She gives a number of examples, including serving a demand for particulars and a request to inspect for information and documents within the Defendant’s knowledge and possession, and delivering materials late.
[11] The Plaintiff states that the Defendant was fully informed as to the potential quantum of costs and what it could expect to pay if it was unsuccessful on the motion.
[12] The Plaintiff submits that she appropriately commenced her action under Rule 76 and notes that she claimed damages that exceeded the Small Claims Court’s jurisdiction by $16,500.00. She points out that this Court relied upon information gleaned from court processes that are not available in Small Claims Court (such as cross-examination on affidavit and undertakings) to award amounts for unpaid bonuses and punitive damages.
[13] The Plaintiff argues that even if a plaintiff recovers damages within the Small Claims Court’s monetary jurisdiction, the Court may still order costs to a successful plaintiff. The Plaintiff points out that the Superior Court of Justice has repeatedly awarded costs to a plaintiff despite recovering damages within the Small Claims Court’s monetary jurisdiction.
[14] The Plaintiff submits that the mere fact that costs exceed the damages awarded does not render an award of costs inappropriate.
Position of the Defendant
[15] The Defendant argues that the Court should exercise its discretion under Rule 57.05 of the Rules of Civil Procedure not to award costs given that the Plaintiff’s monetary recovery puts her claim within the jurisdiction of the Small Claims Court, i.e., $35,000.00. The Defendant notes that the Plaintiff only recovered approximately 38% of the amount claimed in the action. The Defendant points out that the Plaintiff stated in her factum that she commenced this action while the Small Claims Court was still not fully operational due to the COVID-19 pandemic.
[16] In the event that the Court finds that the Plaintiff is entitled to costs, the Defendant submits that any costs award to the Plaintiff should be limited to 15% of $19,923.85 (i.e., $2,988.58) pursuant to section 29 of the Courts of Justice Act (“CJA”) since the action should have been commenced in the Small Claims Court. In the alternative, the Defendant states that the Plaintiff should only be entitled to 30% of the award (i.e., $5,977.15) pursuant to Rule 14.07(1) of the Rules of the Small Claims Court.
[17] In addition, the Defendant argues that any costs award should reflect that success was divided. The Defendant states that it was successful in arguing that the Plaintiff was only entitled to a two-month notice period and had no entitlement to aggravated, mental distress or moral damages. The Defendant submits that the Plaintiff took an unreasonable stance that she was entitled to a five-month notice, which was longer than her actual period of employment with the Defendant. The Defendant also submits that the Plaintiff pursued the remedy of aggravated, mental distress and moral damages when it had no basis in law or chance of success and that her insistence on such damages led to an unnecessary prolongation of this matter. According to the Defendant, any costs award should be reduced by half to reflect the Defendant’s successes.
[18] The Defendant states that on November 16, 2023, i.e., the day before the hearing of the motion, it made an offer to settle this matter for $20,000.00, which is $76.15 higher than the award granted by the Court. I note that the Defendant’s offer does not meet the criteria set out in Rule 49. The Defendant’s offer is contained in an e-mail sent by the Defendant’s counsel to the Plaintiff’s counsel. The e-mail simply states the following:
We confirm that we have instructions to offer $20,000.00 all-inclusive of costs and interest to resolve your client’s action in its entirety.
[19] The Defendant submits that the Plaintiff did not beat her Rule 49 offer dated December 21, 2021. The Defendant points out that: (a) the Plaintiff’s offer was not only for $17,889.23 as it also included $7,000.00 in legal costs, for a total of $24,889.23; and (b) the Plaintiff sought $12,889.23 in damages for wrongful dismissal, unpaid wages and unpaid vacation, but she was only awarded $9,923.85 with respect to wrongful dismissal damages.
[20] The Defendant argues that the costs award sought by the Plaintiff far exceeds any fair and reasonable expectation of the Defendant and is wholly disproportionate to the steps actually taken in the proceeding as well as the amount in controversy. The Defendant states that the Plaintiff’s costs on a partial indemnity basis are approximately double the Defendant’s full indemnity costs, which shows that the Plaintiff’s costs are grossly exaggerated and inflated. The Defendant submits that the time spent significantly exceeds what was reasonable given that there were no discoveries and no trial. The Defendant further submits that the excessive costs stem from involving three lawyers on a case of low complexity, which did not warrant such a use of resources, as well as inflated time charges.
The Plaintiff’s Reply Submissions
[21] The Plaintiff submits that success was not meaningfully divided. She states that the Court found that: (a) the matter was appropriate for summary judgment; (b) the termination provision was unenforceable; (c) the Plaintiff was entitled to reasonable notice at common law; (d) the Plaintiff complied with her duty to mitigate; and (e) the Defendant’s misconduct warranted punitive damages.
[22] The Plaintiff states that she mentioned the continued closure of the Small Claims Court in her factum “as a further reflection regarding the state of the world in the wake of the COVID-19 pandemic and its effect on her job search”. The Plaintiff points out that the Defendant made no attempt to transfer this action to the Small Claims Court. She argues that in defending the action without objection, the Defendant effectively agreed, or at the very least acquiesced, to the claim being brought in this Court.
[23] The Plaintiff points out that the offer made by the Defendant on November 16, 2023 was made the evening before the motion was heard and does not comply with Rule 49.03. The Plaintiff argues that the offer was not fair or reasonable given the steps completed in the action by that time. The Plaintiff states that the outcome that she obtained will exceed the Defendant’s offer unless the Court finds that she is only entitled to $76.15 for costs.
[24] The Plaintiff submits that the apportionment of damages in its Rule 49 offer is not material and that her offer should not be viewed on an issue-by-issue basis. She states that it is not whether she was absolutely successful that matters, but whether the amount recovered exceeds the amount offered.
[25] The Plaintiff argues that the Defendant has grossly misrepresented her offers and that she had clearly indicated that her offers were for damages plus costs.
[26] The Plaintiff states that the time spent by her counsel for the entire action was reasonable.
[27] The Plaintiff’s position is that her claim for aggravated and mental distress damages had a reasonable prospect of success and it was reasonable to pursue it.
Discussion
Monetary Jurisdiction of the Small Claims Court and Quantum
[28] At the time this action was commenced, the monetary jurisdiction of the Small Claims Court was $35,000.00. The amount recovered by the Plaintiff – $19,923.85 – is within the monetary jurisdiction of the Small Claims Court. In fact, the amount that she recovered constitutes only 57% of $35,000.00.
[29] Rule 57.05 of the Rules of Civil Procedure provides that if a plaintiff recovers an amount within the jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs. As the use of the word “may” shows, Rule 57.05 is not mandatory. See Sinnathamby v The Chesterfield Shop Limited, 2017 ONSC 106 at para. 14.
[30] Another relevant provision is section 29 of the CJA. It states the following:
An award of costs in the Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed or the value of the property sought to be recovered unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding. [^1]
[31] The 15% rule set out in section 29 applies unless it is necessary in the interests of justice to penalize a party for unreasonable behaviour in the conduct of the proceeding itself: see Wexler v. Carleton Condominium Corporation No. 28, 2017 ONSC 5697 at para. 14 (Div. Ct.), Giffin Koerth Inc. v Waye, 2015 ONSC 7298 at para. 60 (Div. Ct.) and West End Tree Service Inc. v. Stabryla, 2010 ONSC 68 at paras. 21-22 (Div. Ct.).
[32] In my view, this action should have been commenced in the Small Claims Court. The claim for damages for wrongful dismissal in the amount of $25,000.00 was based on an unrealistic position that the Plaintiff should have received a five-month notice period, which was a longer period than her actual period of employment. Further, the claim for “[a]ggravated, mental distress, moral, and/or punitive damages” in the amount of $25,000.00 was also unrealistic in the absence of any evidence that the Defendant’s conduct caused any mental distress to the Plaintiff and in light of the amounts of punitive damages granted in similar cases. See, e.g., Pohl v. Hudson’s Bay Company, 2022 ONSC 5230 where an award of punitive damages in the amount of $10,000.00 was made.
[33] The fact that this matter belonged in the Small Claims Court was implicitly acknowledged in the Plaintiff’s Factum, which stated the following:
On May 5, 2021, [the Plaintiff] commenced the within action while the Small Claims Court was still not fully functional due to the COVID-19 pandemic.
[34] I do not need to determine whether the Small Claims Court was “fully functional” in May 2021 because even if the Small Claims Court was not fully functional at that time (which I do not determine), this is not a justification to commence an action in the Superior Court of Justice if the action truly falls within the monetary jurisdiction of the Small Claims Court.
[35] While I conclude that this action should have proceeded in the Small Claims Court, it is my view that it would not be appropriate to exercise my discretion not to grant any costs to the Plaintiff under Rule 57.05 of the Rules of Civil Procedure. The Plaintiff was successful in the action and the reprehensible conduct of Gibson in failing to comply with its legal obligations as an employer led to an award of punitive damages. Given this, the Plaintiff is entitled to some costs.
[36] However, I am also of the view that the costs awarded to the Plaintiff should be limited in light of the fact that she should have commenced her action in the Small Claims Court. Had she done so and claimed $35,000.00 in the action (i.e., the maximum amount of a claim in the Small Claims Court), she would have been entitled to costs in the maximum amount of $5,250.00 (15% of $35,000.00) plus disbursements under section 29 of the CJA. I find that the exception to the application of the 15% rule in section 29 – i.e., when it is necessary in the interests of justice to penalize a party for unreasonable behaviour in the proceeding – does not apply in this case. The Defendant’s conduct in the proceeding that is complained about by the Plaintiff does not rise to the necessary level. Further, the Defendant has already been penalized for his conduct outside of the proceeding through the imposition of an award of punitive damages.
[37] Accordingly, I conclude that the maximum costs award that should be made in this case is $5,250.00 plus disbursements in the amount of $2,895.22 (as reflected in the Plaintiffs’ costs outline), for a total of $8,145.22. This is the maximum amount of costs that the Plaintiff would have been entitled to in the Small Claims Court.
[38] However, I agree with the Defendant that this amount should be reduced to take into account the divided success in this case. While the Plaintiff was the successful party in the action, she was unsuccessful, among other things, on the issues of the length of the notice period and mental distress damages, two important issues related to the quantum of damages. In the exercise of its discretion under section 131 of the CJA and Rule 57.01 of the Rules of Civil Procedure, the court is entitled to take into consideration, among other things, the time and expense involved in issues that were not successful. See Henry v. Zaitlen, 2022 ONSC 3059 at paras. 26, 28, 29, 45, and Mount Royal Painting Inc. v. Unifor Canada Inc., 2022 ONSC 6316 at para. 82.
[39] In my view, the fair and reasonable award of costs in the circumstances of this case is $6,000.00, which reflects a reduction of approximately 25%.
The Plaintiff’s Offer to Settle
[40] I find that the Plaintiff’s offer to settle dated December 21, 2021 does not trigger the costs consequences set out in Rule 49.10(1) of the Rules of Civil Procedure because the Plaintiff did not obtain “a judgment as favourable as or more favourable than the terms of the offer to settle”. This is as a result of my conclusion above with respect to the fair and reasonable costs award in this matter. [^2]
[41] My finding that the costs consequences set out in Rule 49.10(1) are not triggered applies whether one considers paragraph 2(a) or paragraph 2(b) of the Plaintiff’s offer to settle. Paragraph 2(b) of the offer to settle provides that if the offer to settle is accepted by the Defendant after January 7, 2022, the Defendant “shall pay the Plaintiff’s costs and disbursements on a partial indemnity basis, as agreed upon or assessed, up to the date on which” the offer is accepted. The Plaintiff’s costs outline reflects costs on a partial indemnity basis of approximately $30,000.00. For the reasons set out above, the Plaintiff is not entitled in this case to “regular” costs on a partial indemnity basis, and such costs vastly exceed the $6,000.00 that I am prepared to award in this case.
[42] Paragraph 2(a) of the offer to settle provides that if the offer to settle is accepted by January 7, 2022, the Defendant “shall pay the Plaintiff’s costs of $7,000 (inclusive of HST and disbursements)”. In evaluating an offer to settle that includes costs in a fixed amount, the proper test is to analyze the amount recovered (including costs) up to the date of the offer to settle. Rule 49 has been found not to apply to an offer that includes a fixed amount for costs instead of costs as assessed if there is some difficulty arising from the assessment of costs as of the date of the offer. See 2287913 Ontario Inc. v. ERSP International Enterprises Ltd., 2022 ONSC 1579 at para. 30, Oskar v. Chee, 2012 ONSC 2939 at para. 12, and Brown v. Township of Ignace, 2010 ONSC 348 at paras. 11-13.
[43] In my view, the Plaintiff would not have been entitled to $7,000.00 in costs as of the date of the offer (or as of January 7, 2022, as provided in paragraph 2(a) of the offer to settle). Based on the Plaintiff’s costs outline, the Plaintiff’s costs on a partial indemnity basis as of December 21, 2021 (including disbursements and HST) were less than $7,000.00. Further, given my conclusion that the appropriate award of costs at the end of the action and after the disposition of the motion for summary judgment was $6,000.00, it cannot be that $7,000.00 would have been awarded by the Court prior to the motion for summary judgment being brought, after only the exchange of pleadings and affidavits of documents. Such an award would not be consistent with the principle of proportionality.
[44] Thus, I am not satisfied that the Plaintiff has discharged her burden under Rule 49.10(3) of the Rules of Civil Procedure to show that the terms of her offer to settle are as favourable as or more favourable than the judgment.
[45] Pursuant to Rule 49.13, I may take into account any offer to settle made in writing in exercising my discretion with respect to costs in this case. It is my view that it is not appropriate to give any weight to the Defendant’s offer to settle because, among other things, it was made the evening before the hearing and its amount is not higher than the amount obtained by the Plaintiff if prejudgment interest and costs are taken into account.
[46] Given my findings above, I do not need to deal with the other issues raised by the parties.
Conclusion
[47] Taking the foregoing into account, as well as the factors set out in Rule 57.01(1) of the Rules of Civil Procedure and the reasonable expectations of the parties, I find that it is fair and reasonable in this case to award costs in favour of the Plaintiff in the all-inclusive amount of $6,000.00.
[48] Accordingly, the Defendant is ordered to pay costs to the Plaintiff in the amount of $6,000.00 within 30 days
Vermette J.
Date: August 21, 2024
[^1]: I note that the Defendant’s submissions regarding the appropriate costs award based on section 29 of the CJA are incorrect because the Defendant uses 15 per cent of the amount awarded instead of 15% of the amount claimed. The Defendant also does not take into account the Plaintiff’s disbursements. [^2]: There may well be other reasons why the costs consequences set out in Rule 49.10 are not triggered in this case, but I do not need to deal with them given my other conclusions.